caroline: from bloomberg's will headquarters in new york, i am caroline hyde. romaine: let's look at where financial markets ended the day. just a few hours away from the start of earnings season, investors pushed the stocks to a record high. caroline: the countdown to inflation data. the fed, chair powell, and countdowns sent richard branson into space. richard branson culling the weekend test flight the dawn of

a new space-age. investors initially cheered the tip -- cheered the trip but then shares came back to earth amid a stock sale. tomorrow morning's u.s. ppi release. jay powell testifying in the week. we are going to start with this on-again, off-again rotation. value to growth, growth to value. where are we? joe: the indices hitting new records today once again, kind of same old story. for several months within this rally this year, there was the story of the so-called great rotation. value taking up the mantle. the blue line is the value index. that one has kind of stalled out. it has not really gone anywhere since early may. the white line growth surpassing the value index in recent days. for more, let's welcome bloomberg news senior editor at

harrison. thank you for joining us. what is the story? it just seemed like, this is like a real moment. value has so much catching up after years and years of outperformance. it ended up being like three months. >> a lot of people have talked about it in terms of the reflation trade. i am looking at it clearly as the 10-year. when interest rates go down, suddenly all of these cash flows , five years, 10 years time, those are worth a lot more money. when interest rates went to 1.7% on the 10 year, your cash flow in 10 or 20 years is not worth as much. now, those cash flows are worth a lot more. that is true not just for large-cap but also some of the smaller companies like nvidia.

romaine: we are at a point where you have to start to look at that as potentially short-term. if we were at the start of a cycle and we saw yields drop, i would understand why people would be partying. but the economy is supposed to be growing, right? you would think yields would be growing with it. >> what is very interesting, i was looking and thinking about it from the reflation trade perspective. the interesting it, when you look at earnings estimates, they have not come down too much for q2 or q3. what has come down is the now cast. when you look at the federal reserve bank of new york or atlanta, they are trending down for q2 and q3. what that says, at the margin, there is that level of disquiet out there. it is not just the fact that yields are coming down, but they are coming down for a reason.

potentially, we saw peak growth and the relative to expectations growth is waning. caroline: i thought it was all technical to a certain agree. are you discounting that in direly, or the u.s. yield curve? edward: i think a lot of the signal they got was technical. that is why i don't really look at it as an end of the reflation trade, so to speak. i think really there were a lot of shorts taken out of the market. there were a lot of duration matching happening because of the convexity at that level of the yield curve. but, overall, there is a at the market level of acceleration relative to expectations that is less than it was before. so, with all the numbers coming

out, lower than they were, say, two or three weeks ago. joe: we can come up with some fundamental expectations as to why that might be. there are concerns about further variants or the virus. natural speed limits on the economy. what about the fed, actions re-pivoting toward inflation in the last meeting. how is that contributed to the shape of the market at least in the last two or three weeks? edward: i look at the fed shorts capitulating. the fed has been telling us that they are in a new regime. this means we will to this average inflation targeting. they are not going to let the economy stagnate. they are going to let it run. but, in fact, people were fighting that. that is why we went to 1.7%.

now, all of the people not fighting it have thrown in the towel, potentially at exactly the wrong moment. tomorrow, we get the cpi, let's find out what it says and what the fed says. romaine: so far, the messaging out of the fed seems to be relatively consistent, at least for this year, next year, maybe 2023, you don't need to worry. edward: when you listen to the fed president, the regional president, they are starting to sing a different tune. they are talking about, when should we taper, how much should we taper? before, it was all about jerome powell saying, we are even thinking about thinking about releasing accommodations. now, suddenly everyone is talking about, when is the taper going to happen? to me, there has been a subtle shift, and that leaves open the

door potentially, just as the markets have capitulated, that the fed could do a switcheroo and change its thinking. caroline: we thank you. coming up, we just discussed that we were counting down tomorrow's cpi report. this is bloomberg. ♪

romaine: on this monday, we are looking ahead to all of those big events coming up this week. a lot of economic data, including tomorrow's cpr report.

the big question of course is the degree to which they are transitory. obviously, we know the line is going straight up in to the right right now. caroline: lumber futures? joe: there is no inflation when you look at that one specific category. we will see if that continues. joining us to discuss more, the author of the chief convexity blog. thank you for joining us. so far, market pricing is pretty on board with this transitory idea. there is nothing that suggests number -- that suggests investors are concerned that what we see now, a straight line up, is going to be sustained. do you see anything in the markets that could be a cause for worry? >> no. i think that is right. i think part of that factor, we

saw a few weeks ago from the federal reserve. it was not necessarily a pivot from them being dovish to be in hawkish, but it is a pivot for the degree that they are dovish. i think the market has internalized the message that we are embracing this idea, going back to q1, that the fed would be quote unquote reckless this time around. i think now looking at the june meeting, how we have seen the fed's bar in terms of nervousness has been hit, i think the market took that as a message, the right inflation outcome is coming out of the distribution. this has been evident for things like inflation expectations, etc., where a lot of market-based expectations are reducing the level of inflation

going back to what seems to be persistently hot. caroline: where's the market getting its cues from? they must dovish person on the fed seems to be the chair himself. but the other members of the fomc seem to be a little bit more hawkish in their tone. should we take that much from fed chair powell this week? >> i think that it is a confusing one of a when looking at the dots compared to what would be the core of the market committee. i think the reason the market is paying such a heavy emphasis is that those dots became a litmus test for the framework. the idea that you want to post cyclically expand the policy, show it to me in the dots. especially the 2023 dots,

basically the litmus test or anchor it could point to. i think june kind of busted that. it is not to say that the fed will be hawkish or preventative of a broader cycle. when you look at what the fed is projecting in terms of nominal gdp growth, only 60 basis points of hikes, that is still accommodative. it is just not as accommodative as we thought. for the market perspective, you get these broader divisions in the sense that there are two big ones. the first one, between the regional bank president and the board, where regional bank presidents are hearing that rates are high, labor is scarce, etc.. hearing from the staff that a lot of this is transitory, and we are hearing that from lumber prices, used car prices. i think, because the fed kind of

showed their point of nervousness, the market took the cue that there was a transition? i think within the board now, they will be this debate. i think from a market perspective, the idea that it is more of this concept that allows the fed to kind of engineer this procyclical expansion of policy without the market getting in the way. and now looking forward, the market comes to terms. state as a technical element to it. if they are going to take inflation this year as seriously as deflation last year, then on any one year look back measure, you will be close to home in terms of what the fed justifies as a hike? romaine: as we watch those divisions and the market tries to wrap their head around it,

there is a general theory that, while the market they react in a negative fashion, at some point, they will come around, just like the market came around to a can't fight the fed mantra. the market will somehow find a way to adjust and more importantly find a way to prop it up. >> i think for the market and the fed, it is a very confusing time because there was an element of space that was designed to have this constructive ambiguity element that was supposed to basically reinforce this idea, we have not defined our terms exactly, but this is kind of the direction we are traveling. now, i think from the market perspective, we understand the direction. this has been almost a year since the fed introduced this new reaction function. but as the economy continues to make progress and we get closer

to tapered asset purchases by the end of the year, the market will look tomorrow these terms that really have been absent since the fed introduced their new framework at jackson hole last year. so i think in terms of the fed and the market, and that relationship, there are a lot of terms that need to be defined and i think that is why there is this confusion on both sides. joe: we see it playing out in theory. also, as we were just talking about in the last segment, growth solidly outperforming value once again. are we going back to the old world, the post great financial crisis, pre-corona? >> i think that is the correct impulse trade. but i think that is still a trade i would rather rent than own. i think the market is going to deal with a very pivotal

transition period in the third or fourth quarter of this year. peak everything right now, whether that is fiscal policy, credit impulse, peak everything. the market is kind of wearing about this handoff for all these impulses to the private sector. i think there are reasons to believe that this time around, given where private balance sheets are or the stock of fiscal policy, that we could be in a different nominal gdp era. i think considering the last cycle, it was so clear and obvious to always save private-sector dynamism. i think that the impetus for a lot of these cyclical related assets, especially for people paying rates, shortening bonds, that at least the fed is different this time. i think as that premium kind of gets reduced, at least over the

near term, over what could be the 2022 economy. but i don't think the promise is dead yet. romaine: always great to get your thoughts. jon turek, author of the cheap convexity blog. next up, we will talk about what is going on in space, or at least the edge of space. virgin galactic successfully launching ceo richard branson to space. we will have more on what that flight means for the space tourism industry. this is bloomberg. ♪

caroline: today, we have been all focused on the countdown. the fed, inflation. talking about the weekend test flight by richard branson. joe: look at that. virgin galactic. lift off. is that outer space? caroline: the edge of space. joe: extremely impressive. romaine: i kind of want to go. we will pool our resources. joe: not only a pioneer of space trial but -- space travel but also -- joining us now with more, why are spac's and space kind of like this combo? what is it about this industry

that found this financing vehicle attractive? >> there are so many for an industry that is relatively obscure and difficult. there were two just this year. there are four or five more scheduled depending on what you count as a space company. i talked to a bunch of people about, what is this? i am told that the type of investor who is captivated by space, which after all is pretty cool, is also very likely to be captivated by these very high revenue projections, a lot of these space companies will make. they believe in the numbers, which are debatable a lot of the time. they are just filling to take a chance to make this happen. of course, these companies are very capital-intensive and need lots of capital at relatively

early stages. caroline: so, you are a dreamer if you want to go to space, you already dreamer if you want to back a space spac. are they all not to do with tourism? >> virgin galactic is a space tourism but then it turns out there are all types of companies around space. there is a company around space infrastructure. so you might need a robotic arm to fix your satellite. you might need a solar array. there is another company that, if you have your satellite up in space but you need to get it into orbit properly, they plan to specialize in that. there were companies that help us do things on earth better, for example one that is going to use a new type of satellite to deliver mobile phone service.

it does not say exactly how it is going to do that but investors are excited. romaine: there are shades of early space -- early stages of the space satellite industry. you go back to some of the early stages of the railroads here. a lot of people were questioning, where is the business model? of course, you look back and you say, it all makes sense. i guess the question, people who are getting in on this now and think they are in on the ground floor, how long do they have to wait before they see a real true industry or trooping out? sarah: it depends on the company. potentially many years. most companies through a traditional ipo at least half some revenue. a lot of these companies are very upfront about they do not have revenue. i have listened to a lot of earnings calls. it is very unusual to your ceos. this is the case with virgin galactic saying over and over,

call after call, we had no revenue this quarter because we had no spaceflights. in the quarters where there were test flights, they remind investors, we did have a flight but still no revenue. some of the mark zero revenue year after year but then 4, 5 years out, they may project $20 million going to $500 million the following year, $800 million after that. they can be a little bit looser with how they project revenue, which makes them a little bit more dangerous for certain investors. caroline: sarah mcbride, thank you so much. all things spac, all things space. romaine: the zero revenue thing, we used to have those, those were called private companies. they sort of waited until they had revenue. joe: 2020.

romaine: it is actually 2021. caroline: that does it for "what'd you miss?" joe: "bloomberg technology" is next. romaine: have a great evening. this is bloomberg. ♪ (announcer) back pain hurts,

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>> from the heart of where innovation, money, and power collide in silicon valley and beyond. this is "bloomberg technology" with emily chang. emily: elon musk in court. the tesla ceo trying to defend the $2.6 billion purchase of solarcity in response